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Commentary - Strong terms needed for contracts

The signing of a contract is a symbolic as well as a legal moment in the relationship between two pa...

The signing of a contract is a symbolic as well as a legal moment in the relationship between two parties. It confirms the parties' intentions and sets out the basis of the relationship.

It is thus essential in all contracts that each party's intentions are clearly recorded to avoid future disputes and protect each party should a dispute arise by confirming, for example, levels of compensation payable.

A good example of the importance of good contractual terms can be seen in the football transfer market. The signing of contracts is always a flamboyant affair confirming each parties' excitement and desire to work together. But how many ever last their full term?

A recent example of this being the alleged poaching of Frank Arnesen by Chelsea from Tottenham Hotspur. It was alleged by Spurs that Mr Arnesen was in breach of his contract and league regulations. Spurs confirmed that unless significant compensation was paid by Chelsea it would hold Mr Arnesen to the final two years of his contract, report the incident to the Football Association and bring a civil action against Chelsea.

The case was settled by payment of between £8m-£10m to Spurs. This substantial payment reflects the strength with which Spurs was able to rely upon the terms within its contract with Mr Arnesen and to take such a strong position within its settlement negotiations.

This underlines the importance of strong and certain contractual terms to ensure adequate protection and to give yourself some contractual spurs.

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